Audit of the Determination of Whether Net State Tax Revenues Exceeded Allowable State Tax Revenues -- Fiscal Year 2021

This is the State Auditor’s review of whether Massachusetts tax collections stayed within the revenue limit set by Chapter 62F for fiscal year 2021.

“In accordance with the provisions of Chapter 62F of the Massachusetts General Laws, we have reviewed the Report of the Net State Tax Revenues and Allowable State Tax Revenues for the fiscal year ended June 30, 2021, as prepared by the Commissioner of Revenue.”

The audit was required to check the tax revenue report for accuracy and decide whether the state collected too much under the Chapter 62F formula.

“Our review was conducted for the purposes of ensuring the completeness and accuracy of the report and determining whether the net state tax revenues for the fiscal year ended June 30, 2021 exceeded allowable state tax revenues for that fiscal year.”

This matters because the Auditor’s finding is the official decision on whether excess tax revenue exists and how much it is.

“The law further states that the determination of the State Auditor as to the existence and the amount of excess state tax revenues shall be conclusive.”

For ordinary taxpayers, the practical result is that this report did not lead to a Chapter 62F tax credit for fiscal year 2021.

“For the fiscal year ended June 30, 2021, we have determined that the net state tax revenues of $34,655,837,068 were below the allowable state tax revenues of $36,789,926,416 (as defined in Chapter 62F of the Massachusetts General Laws) by $2,134,089,348, resulting in no excess state tax revenues (see Exhibit I).”

The state collected about $34.66 billion in net taxes, which was about $2.13 billion below the allowed amount.

“As a result of our review and as disclosed in the accompanying report, we have determined that the net state tax revenues of $34,655,837,068 for the fiscal year ended June 30, 2021 were below the allowable state tax revenues of $36,789,926,416 (as defined in Chapter 62F of the General Laws) by the amount of $2,134,089,348.”

Because there was no excess revenue, the report does not call for the Commissioner of Revenue to issue a Chapter 62F credit.

“Thereafter, the Commissioner shall take all the necessary action to effectuate a tax credit equal to the total amount of such excess.”

The report shows that income and sales/use taxes made up most of the state’s net tax revenue in fiscal year 2021.

“During this fiscal year, $27,511,972,343, or approximately 79% (see Exhibit III), of the net state tax revenues were derived from income and sales and use taxes, which are traditionally the largest sources of revenue received by the Commonwealth.”

The growth limit is tied to changes in Massachusetts wages and salaries; in simple terms, the formula compares tax revenue growth with wage growth.

“Wage and salary yearly growth rate is calculated by dividing each calendar year’s wages and salaries by those of the previous calendar year.”